Gold Price - Where is it heading?

explod · 8 October 2010

Great post there Sinner.

What is your rationale with silver?

As the price of gold increases, supply will dry up proportionally. The higher it goes, the less supply will be available to be sold onto the market. The opposite to all other commodities (even silver).

nukz · 8 October 2010

sinner said:
A lot of money would be made? Don't you mean lost. Gold would simply retain it's purchasing power relative to fiat! No money would be made!

Interesting, you got me there

I actually read somewhere that JP morgan and a few other large banks own around 40% of all the shorting contracts for gold anyway which has been supressing the price for a while(possibly a similar story to that of silver).

explod · 8 October 2010

nukz said:
Interesting, you got me there

I actually read somewhere that JP morgan and a few other large banks own around 40% of all the shorting contracts for gold anyway which has been supressing the price for a while(possibly a similar story to that of silver).

Yes that is the case, in fact the percentages on silver are thought to be higher.

As for not making anything on gold, that is absolutely correct and is a point not clearly understood. What gold does do is that when the current financial music stops and paper money becomes trash (as its fast doing now) in gold holdings (physical in the hand) you will still have something tangible.

Gold has a long history and is a comlplex story. The answers can be found by skimming through this entire thread. It is obvious that many new posters have not done that. Any investment/insurance should be totally understood before putting your hard earned in.

And as it has done in the last few months, silver will outperform gold in the next few years ahead as its use in industry have it continually in short supply. Throughout history, it too, has been part of monetary exchange. Known as the poor mans gold.

skcots · 8 October 2010

explod said:
Great post there Sinner.

What is your rationale with silver?

What he said ^^^

And yes what is your rational with silver? Is it because miners are not primarily chasing after it?
The thing is silver is generally destroyed or lost after use whereas gold is recovered. Things might change with an increase in price though.

explod · 8 October 2010

skcots said:
What he said ^^^

And yes what is your rational with silver? Is it because miners are not primarily chasing after it?
The thing is silver is generally destroyed or lost after use whereas gold is recovered. Things might change with an increase in price though.

He did not give any relative to silver, it was an assertion.

I did explain the silver situation from my perspective. Yes, production/mining will increase but also as with gold the easy stuff has been claimed and new frontiers elusive.

And new discoveries or former mines take time to be brought back into production, up to 3 or 4 years and with that time frame funding now is nearly impossible. The need to fill orders for silver contracts is immediate.

However this is not really that relevant, gold and silver has broken out and is heading north.

The trend is your friend untill the bend, a good stop loss on gold related investments in my view is 10% but cannot see that at the moment.

sinner · 8 October 2010

explod said:
He did not give any relative to silver, it was an assertion.

What % of central banks in the world hold silver in their reserves at what % of their total reserve assets? Mexico and China still has all their pre-Communist silver holed up somewhere I'm sure. CBs are still holding gold at 10%ish, and it used to be 60%ish, that 10% will increase in a lot of value if there is a paper crisis, right?

Imagine what sort of industrial demand would exist for silver in a big recession? Would that decreased level of market consumption be greater or less than an assumed increase in investment demand?

I did explain the silver situation from my perspective. Yes, production/mining will increase but also as with gold the easy stuff has been claimed and new frontiers elusive.

Look, my perspective on silver is obvious, I put my my money where my mouth is on CXC and have been ranting on this forum for ages about pre-Decimal pre-1946 Australian Sterling coins for minted physical. I post gold:silver ratio chart and discussion often. I convert trading profits to a specific % in gold and silver of my total assets.

Silver is a precious metal, gold is a precious metal. But let's be under no illusions and acknowledge that they are not the same thing!

as it has done in the last few months, silver will outperform gold in the next few years

Silly rationale. What you are essentially arguing is that higher the higher the beta coefficient to gold the better?

Let's chart the theory the "lowest dollar gold price in recent years was the afternoon fix on 20th July 1999 when gold fixed at $252.80 US equivalent at the time to £161.091 in pounds sterling" so we can pick the start of 1999 as a performance reference point:

(interesting though if you use July 13 -close to July20 as the ticker gets at that resolution- as a reference point gold is outperforming everything, even oil)

Buy gold specifically because it isn't high beta.

Logique · 8 October 2010

Sinner's post was complex, and I didn't understand it, but will read it again.

I did understand this article from Dr Shane Oliver of the AMP:

http://www.sharecafe.com.au/article_air.asp?a=AV&ai=18210

..Conclusion
The surge in global liquidity now underway is likely to provide further fuel to the next major asset bubble which is likely already in the process of forming.

Potential candidates are gold and commodity prices, emerging markets and resources shares.

But the absence of obvious overvaluation suggests we are still in the foothills of the next bubble which likely has years to run, with plenty of opportunities for investors in these assets in the interim.

So_Cynical · 8 October 2010

Logique said:
Sinner's post was complex, and I didn't understand it, but will read it again.

I did understand this article from Dr Shane Oliver of the AMP:

http://www.sharecafe.com.au/article_...?a=AV&ai=18210

..Conclusion
The surge in global liquidity now underway is likely to provide further fuel to the next major asset bubble which is likely already in the process of forming.

Potential candidates are gold and commodity prices, emerging markets and resources shares.

But the absence of obvious overvaluation suggests we are still in the foothills of the next bubble which likely has years to run, with plenty of opportunities for investors in these assets in the interim.

I saw the bubble forming months back.

So_Cynical said:
(12th-March-2010) Just wondering if anyone is concerned about a potential ETF gold bubble...the SPDR Gold ETF is the 7th largest gold holder in the world, and the money that has flowed into that ETF could just as easily flow out when the sentiment turns....is this an issue for anyone?

i also think it could run for years, but believe it wont, investors unwinding Gold ETF positions will become an avalanche once it starts...the next big bottom could well be a gold/commodity's bottom.

explod · 8 October 2010

What % of central banks in the world hold silver in their reserves at what % of their total reserve assets? Mexico and China still has all their pre-Communist silver holed up somewhere I'm sure. CBs are still holding gold at 10%ish, and it used to be 60%ish, that 10% will increase in a lot of value if there is a paper crisis, right?

Imagine what sort of industrial demand would exist for silver in a big recession? Would that decreased level of market consumption be greater or less than an assumed increase in investment demand?

So we are also talking about a recession now? In fact one of the main use in computers and phones is but a small quantity in each and the 3 billion people across India and China will still want thier's, and that in my view will be exponentially.

We are both talking basically in the anecdotal. CBs no longer make public their audits on gold holdings. I do not know but some say most have sold it all and the ending of sales merely signals the end of many holdings. There are some reports that CBs are part of the buying, but we do not really know.

On silver we will see as time pans out. I did not say they were the same thing but they are certainly both very sound alternatives to cash in the currency crisis and they are a part (but yes in intoto) of the main four precious metals as distinct from commodities. My 1966 silver 50c pieces have almost doubled in value in 2 years.

Silly rationale. What you are essentially arguing is that higher the higher the beta coefficient to gold the better?

Let's chart the theory the "lowest dollar gold price in recent years was the afternoon fix on 20th July 1999 when gold fixed at $252.80 US equivalent at the time to £161.091 in pounds sterling" so we can pick the start of 1999 as a performance reference point:

In this I am referring to the current ratio of 60/1. It has been as low as 20/1and in a market looking more and more for physical delivery (which for silver bars has stretched out to months, when three years ago it was less than a week) a good case can be made for the ratio to go at least back to 40/1.

But we just do not know. I'm just saying we should not write it off out of hand, and this was the original point, from where I sit, in our discussion this evening.

explod · 8 October 2010

So Cynical:

i also think it could run for years, but believe it wont, investors unwinding Gold ETF positions will become an avalanche once it starts...the next big bottom could well be a gold/commodity's bottom

Doubts have emerged on the actual holdings of ETFs which has caused some departures.

Why do you believe there will be an avalanche once it starts in this area ?

Uncle Festivus · 13 October 2010

explod said:
Doubts have emerged on the actual holdings of ETFs which has caused some departures.

Why do you believe there will be an avalanche once it starts in this area ?

Personally I believe that when the crunch time comes the only true way to take advantage of the gold trade is to have physical in your hot little hands. NO other form will hold up. Even shares of gold companies will be useless because the authorities will simply shut these markets down, literally overnight. Un-allocated holdings will simply be left unallocated. The structure and market that ETF's are traded in will determine if you make, or get back, your money on these instruments?

Now if the government then outlaws the holding or trading of gold bullion then we get back to year 1 - a whole new ball game?

The current gold price is making me nervous (not enough to make me sell my bullion though). Could be a correction which will sort the wheat from the chaff, coinciding with an equities sell off, before the last event starts, just don't know when??

nukz · 13 October 2010

From my technical analysis the bottom for the USD will happen around 7/12/2010 then it will rebound for a short while before starting to head back down again and it should then break below its previous low.

It's quite hard to tell right now because all this money printing is distorting the market abit.

I did actully move into physical gold/silver a little while back after hearing rumours about ETF's i guess its better to have it in your hand than on paper.

If there is any drop in gold generally i try and use CFD's to hedge my positions. Hopefully i'm smart enough to get in at the right time.

Overall though i do see a very bright future for gold and the simple reason is because i see a very bleak future for the USD.

explod · 13 October 2010

Uncle Festivus said:
Now if the government then outlaws the holding or trading of gold bullion then we get back to year 1 - a whole new ball game?

Interesting post Uncle. In the trading of bullion, are you here refering to the paper trading as distinct from physical dealing ?

My leaning towards physical silver holdings, including some silver coins, result from concerns along those expressed by you here. What is your take on this rationale ?

Uncle Festivus · 13 October 2010

explod said:
Interesting post Uncle. In the trading of bullion, are you here refering to the paper trading as distinct from physical dealing ?

My leaning towards physical silver holdings, including some silver coins, result from concerns along those expressed by you here. What is your take on this rationale ?

Only trade the pretend gold markets eg cfd's, but accumulate physical ie bullion on the dips.

I think it was Sinner who put forward some postulations on possible scenarios for the markets and gold, so I was thinking that the so called gfc was a rehearsal for what is about to happen because of the currency wars between the US & China, and the imminent implosion of China either from it's very own various bubbles or from continued trade sanctions from the US. It's always been a race to the bottom for fiat currencies and combined with cheap (slave) labour from the so called developing countries means that the developed countries have no chance of producing stuff to be consumed externally because their manufacturing costs are to high, relative to places like China, India etc, where even they are now being outsourced to even cheaper places like Vietnam.

They still think it's a matter of pumping the system with helicopter drops of fresh $USD's but the problems are structural now because of the globalisation of cheap labour, and in the case of the USA, cheap credit to fund living beyond their means? Actually Aus is in that basket now too, only we haven't had our days of reckoning yet?

It's going to get nasty, so keep liquid & have a plan to accumulate real money - not that I have to point out the obvious to you Explod

Ageo · 13 October 2010

What amazes me about this country is no bank (in NSW anyway) will take gold as collateral for any loan..... i mean it is by far the best form of security then anything else bar nothing (liquidate in 1 day) unlike real estate which fkn takes forever.

I still think the world as no idea on gold and its uses as another form of currency etc....

Name any physical item on earth where you can move millions of dollars worth in a matter of a couple of days anywhere in the world?

Precious Metals and in particular gold/silver....

Problem is people perceive gold like diamonds "luxury's but thats not true as luxury's are items of creativity/style and rarity. Gold/silver isnt so, they are currency (as they were many yrs ago) and the sooner people get their head around it the better it will be for the metal.

sinner · 13 October 2010

I want to revisit this post...

explod said:
So we are also talking about a recession now? In fact one of the main use in computers and phones is but a small quantity in each and the 3 billion people across India and China will still want thier's, and that in my view will be exponentially.

Err no, we are not talking about a recession, I was referring the possibility of a recession as the sort of event which it can be seen visibly separates silver from gold!

We are both talking basically in the anecdotal. CBs no longer make public their audits on gold holdings. I do not know but some say most have sold it all and the ending of sales merely signals the end of many holdings. There are some reports that CBs are part of the buying, but we do not really know.

Sure, explod, CBs no longer make public their audit on gold holdings. So what? We know they don't hold silver, but they do hold gold! That isn't anecdotal in the slightest.

On silver we will see as time pans out. I did not say they were the same thing but they are certainly both very sound alternatives to cash in the currency crisis and they are a part (but yes in intoto) of the main four precious metals as distinct from commodities. My 1966 silver 50c pieces have almost doubled in value in 2 years.

You have a habit of conflating true statements with anecdotes as evidence. If I had bought copper 2 years ago my pieces would be worth more than double your silver. Does that mean I should have bought copper?

In this I am referring to the current ratio of 60/1. It has been as low as 20/1and in a market looking more and more for physical delivery (which for silver bars has stretched out to months, when three years ago it was less than a week) a good case can be made for the ratio to go at least back to 40/1.

Will revisit the ratio charts at the end of the month, but interesting things are clearly happening in terms of "things priced in ounces of gold".

explod · 13 October 2010

Sinner:Sure, explod, CBs no longer make public their audit on gold holdings. So what? We know they don't hold silver, but they do hold gold! That isn't anecdotal in the slightest

How do you know that they hold any gold at all ?

You have a habit of conflating true statements with anecdotes as evidence. If I had bought copper 2 years ago my pieces would be worth more than double your silver. Does that mean I should have bought copper?

Anectotal it maybe, but silver has true value, paper does not. Copper fine, I do save that in physical form too. Anything but bonds, savings in the bank or term deposits for me.

Anecdotes you say in essence are not true ?

Evidence, you have not presented either I might add.

Err no, we are not talking about a recession, I was referring the possibility of a recession as the sort of event which it can be seen visibly separates silver from gold!

Agree with you, but in this context it will not in my view, silver will be seen equally with gold, and as you avered, copper and there will be some other tangibles that come into it too. Why ?, because they are wealth in the hand, paper will be trash and is heading for the dustbin by the day..

Agentm · 14 October 2010

Ageo · 14 October 2010

Agentm said:

Thats nothing more than Gold Buyers Australia here but that "Gold Promise" company has Mr T as their endorser

problem is they pay way below market value..... and to be honest any idiot that sends gold in the mail to sell is asking for trouble.

Agentm · 14 October 2010

Ageo said:
Thats nothing more than Gold Buyers Australia here but that "Gold Promise" company has Mr T as their endorser

problem is they pay way below market value..... and to be honest any idiot that sends gold in the mail to sell is asking for trouble.

i recently had a gold item valued for a relative by very good jeweller i have known for years, his price was pretty accurate. i met up with my relative at a shopping centre and happened to see one of those gold buying booths,, i asked them to weigh and value it.. 20% of what i had just had the item valued at was all i was offered..

to get the booth and pay for the floor space on these major shopping centres they sure have to lower the value of the gold..

i politely told the stunning chick how inaccurate by weight their scales were on the gold.. and told her the real value by weight alone..

i must admit she was getting pretty excited about getting that piece off me, and i could see why.. but i think anyone selling to them is really getting screwed big time..

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